Gold can be one of the most valuable things you can hope to buy on the open markets in 2021, and this is something generations have known since time immemorial. However, as you may notice when you do your due diligence with gold sellers such as UK Bullion, you may find that there are many different ways of measuring the price.
Can you make sense of the difference between troy or imperial ounces? Or what gold price fixing means? And how can prices vary between currencies, if a gold item is seemingly identical, no matter which country it is in? UK Bullion can help break down these definitions for you, and answer your queries about the price of gold.
What’s in an ounce?
If you wish to buy gold today, one of the most common ways of buying it would be in ounces (otherwise known as oz). But did you know about the difference between a troy ounce (T/Oz) and an imperial (regular) one? The former is believed to be an archaic term referring to the French town of Troyes, which was a popular merchant town where gold was often exchanged as long ago as the 9th century.
By the Middle Ages, British merchants began to use troy ounces as an official unit of measurement. You may hear ounce and think, how does this differ to an imperial ounce? In short, imperial ounces simply aren’t used as an official unit of measurement for weighing gold. In actual fact, a typical troy ounce of gold is 2.753 grams heavier than a regular ounce.
As of September 2021, a single troy ounce of gold is priced in British pounds at approximately £1,300, a considerable value for an item so small. The most common ways to buy gold weighing a single ounce is in the form of a one-ounce bullion bar, which can fit in the palm of your hand, or a 1-ounce gold bullion coin such as a Britannia or a Krugerrand. To ensure your gold bar is authentic, it should carry a number of markings on its surface, denoting the people who minted it, its purity and its weight.
UK Bullion has a number of one-ounce gold bars for you to take a look at, sourced from respected producers such as The Royal Mint, PAMP Suisse, Metalor, Umicore and Valcambi. As you may see from the gold markets, troy ounces are something of a benchmark for pricing gold, and as a result, many one-ounce providers experience high demand.
Fixed prices for gold
Don’t worry, when you hear about the use of fixing when it comes to setting gold prices, it’s not about men in suits artificially supressing prices to short-change the consumer. The Gold Fix, otherwise known as the London Gold Fixing is simply the regular setting of gold prices, conducted over twice-daily phone calls by the London Gold Market Fixing Limited. There are over a dozen participants in the fixing conference calls, including the Bank of China, the Bank of Nova Scotia, JPMorgan Chase, Morgan Stanley and other such leading financial institutions and businesses. Prices are fixed twice daily in US dollars in order to settle contracts between traders in the London bullion market, before being converted into a number of other currencies including British pounds, Canadian dollars, Chinese renminbi and the Euro, as well as another dozen other currencies.
The London Gold Fix helps establish a benchmark with which the gold markets can effectively trade gold, with pinpoint accuracy. At UK Bullion, we provide an up-to-date Gold Price Chart to help visitors to our website track the changing price of gold in GBP and other currencies, based on data supplied from live global transactions. Prices are updated every five seconds and can fluctuate depending on the live transactions going on at any given moment.
As you might notice, prices between currencies can differ wildly, and this might make you somewhat confused. How, for example, did the UK gold price manage to rack up a year of new all-time highs between the summer of 2019 and the peak in August 2020, but the US gold price only managed to do so for little more than two months in the summer 2020? The answer is currency dynamics, or how they fare versus the US dollar more specifically.
In 2007, there were approximately two US dollars to a British pound, but following the Great Recession, the Eurozone crisis, Brexit and the COVID-19 pandemic, this exchange rate has fallen. As of September 2021, there are now just 1.38 US dollars to a single pound. This deterioration in the pound’s strength against the dollar automatically means that anything priced in dollars and then converted into pounds experiences that knock-on devaluation boost. For example, if gold was still converted using the 2007 exchange rate, UK gold prices would currently be closer to £900 per troy ounce.
However, due to the devaluation of the pound, irrespective of price action in gold, prices are actually worth £1,300 per troy ounce at present. The shifting relationship between currencies is an important factor to consider, when buying gold. Not only can you benefit from jumping into the gold market at a time when prices are rising in US dollar terms, but if you spot a currency which is falling in tandem with the rising price, you could reap a golden price dividend.
Gold buyers made something of a Brexit-related price dividend between 2016-20, when prices effectively doubled, with UK price gains outpacing the US-denominated gold price due to political and economic uncertainty.
Nobody knows what the next big crisis may be which could push gold prices higher, in US dollar terms or any other commonly traded currency you care to mention. As things stand, gold remains just shy of its latest all-time high which was set back in August 2020, in both US and UK pricing. Traditionally, the pound has steadily lost value to the dollar over the years, suggesting that UK gold prices are the one to watch, as this could allow for greater price gains due to the devaluation effect.
UK Bullion is placed to help you step into the gold markets, with a range of gold products of various shapes and sizes. From gold coins to bullion bars, we have a complete set of items from a range of major producers renowned for the quality of their items and their workmanship. We also have the means to give you a number of storage options, so you can preserve your wealth in gold for many years to come.